The sale of 30 million Time Warner shares, which was handled by Merrill Lynch, was one of the largest-ever single sales of stock. A spokesman for Seagram said the cash would be used for "corporate purposes", including repayment of debt and share repurchases.
However, several analysts interpreted the statement as a signal that Seagram was looking to acquire. It is possible the company may try to buy out Viacom's 50 per cent share of USA Network, the cable television outfit currently split between Viacom and Seagram.
Purchasing USA Network - which consists of the USA Network, a popular cable channel, as well as the much smaller Sci-Fi channel - would give Seagram the opportunity to have its own television outlet tied to its film empire, Universal Studios.
The beverage giant picked an opportune moment to sell the stock, which reached a record high of $49.13 just over a week ago. Seagram is to retain 26.8 million Time Warner shares for 120 days, but it is thought these may also be disposed.
After announcing the sale, Seagram's president, Edgar Bronfman Jr, said: "Given the recent price improvement in Time Warner stock, we believe this was an appropriate time to reduce the size of our holdings."
Time Warner will not be unduly perturbed by the slow exit of Seagram, which is a strong rival in the entertainment industry. The company, headed by Gerald Levin, will also welcome the fact that the stock is being sold to institutional investors rather than to any single buyer with potential takeover ambitions.
Yesterday's events revived rumours that Seagram may try to expand its drinks portfolio in response to the planned merger between Grand Metropolitan and Guinness.